“Public finances in India, state and Union, show appalling accounting and lack of transparency. Vast amounts of waste, fraud and malfeasance get hidden as a result. The Congress, BJP, official communists, socialists et al are all culpable for this situation having developed – over decades. So if you ask me, “Is the Indian state and polity in a healthy condition?” I would say no, it is pretty rotten. Well-informed, moneyed, mostly city-based special interest groups (especially including organised capital and organised labour) dominate government agendas at the cost of ill-informed, diffused masses of anonymous individual citizens ~ peasants, forest-dwellers, small businessmen, non-unionized workers, the destitute, etc. Demarcations of private, community and public property rights frequently remain fuzzy. Inflation causes non-paper assets to rise in value, encouraging land-grabs. And the fetish over purported growth-rates continues despite measurements being faulty, not reaching UN SNA standards, probably hiding increasing inequalities. India’s polity and economy are in poor shape for many millions of ordinary people. Armed rebellion, however, does not follow from this. Killing poor policemen and starting class-wars were failed Naxal tactics in the 1970s and remain so today. Naxals should put down their weapons and use Excel sheets and government accounting data instead.

Long time no see. Happy Holi 2010.

But I am unable to see what you could mean by it because your chapter seems devoid of any reference or allusion to the vast discussion over decades of the subject known as the “microeconomic foundations of macroeconomics”. Namely, the attempt to integrate the theory of value (microeconomics) with the theory of money (macroeconomics); or alternatively, the attempt to comprehend aggregate variables like Consumption, Savings, Investment, the Demand for & Supply of Money etc in conceptual terms rooted in theories of constrained optimization by masses of individual people.

It is not an easy task. Keynes made no explicit attempt at it (recall Joan Robinson’s famous quip) and probably did not have time or patience to try. Hicks and Patinkin failed, though after valiant efforts. The modern period on this work began with Clower and Leijonhufvud, followed by the French (like Grandmont), and especially Frank Hahn. Hahn’s 1976 IMSSS paper “Keynesian Economics and General Equilibrium Theory” is the survey to read, viz., Equilibrium and Macroeconomics and Money, Stability and Growth as well as of course Arrow & Hahn’s General Competitive Analysis. You may agree that the general theory of value culminated in an important sense in the Arrow-Debreu model of the 1950s — yet that is something in which no money, and hence no macroeconomics, needs to or can really appear. The hard part is to develop macroeconomic models for policy-discussion which allow for money and public finance while still making some pretence of being rooted in a theory of constrained optimization by individuals, i.e., in microeconomic behaviour. (E Roy Weintraub wrote a textbook with “Microfoundations” in its title.)

These together outline an idea that the link between macroeconomic policy in India and individual microeconomic budgets of our one billion citizens arises via the “Government Budget Constraint”. More specifically, the continual deficit-finance indulged in by the GoI for decades has been paid for by invisible taxation of nominal assets, causing the general money-price of real goods and services to rise. I.e., the GoI’s wild deficit spending over the decades has been paid for by debauching money through inflation.

(The unrecorded untaxed “black economy” needs a separate chapter altogether, and it seems to me possible it provides enough real income and transactions to be absorbing some of the wilder money supply growth into its hoards.)

India cannot be a major economy of the world until and unless the Rupee some day becomes a hard currency — for the first time in many decades, indeed perhaps for the first time since the start of fiat money. It is going to take much more than the GoI inventing a trading symbol for the Rupee! The appalling state of our government accounting, public finance and monetary policy, caused by the GoI over decades, disallows this from happening any time soon as domestic bank assets (mostly GoI debt, and mostly held by government banks) would inevitably be re-evaluated at world prices foreshadowing a monetary crisis. Perhaps you will help slow the rot — I trust you will not add to it.

Cordially yours

Suby Roy

Postscript March 1 2010: I recalled it as Joan Robinson’s quip, had forgotten it was in fact her quoting Gerald Shove’s quip: “Keynes was not interested in the theory of relative prices. Gerald Shove used to say that Maynard had never spent the twenty minutes necessary to understand the theory of value.” (1963)

Last year I wrote but happened not to publish this brief article which may be relevant today.

Subroto Roy
May 28 2008

Like the AIDS epidemic that never was, “climate change” is on its way to becoming the new myth sold by paternalist governments and their bureaucrat/scientist busybodies to ordinary people coping with their normal lives. E.g., someone says, without any trace of irony: “Everyone in the world should have the same emissions quota. Since Trotsky’s permanent revolution is unfortunately on hold at the moment, and the world still happens to be partitioned into nations, once the per capita quotas are determined they would have to be grouped on a nationwide basis”.

Trotskyism will have to be made of sterner stuff. Canada’s Lorne Gunter (*National Post* 20 May 2008) reports that Noel Keenlyside, the principal scientist who suggested that man-made global warming exists, has now led a team from the Leibniz Institute of Marine Science and Max Planck Institute of Meteorology which “for the first time entered verifiable data on ocean circulation cycles into one of the UN’s climate supercomputers, and the machine spit out a projection that there will be no more warming for the foreseeable future.…” Oops! So much for impending catastrophe. Rajendra Pachauri himself has in January “reluctantly admitted to Reuters… that there has been no warming so far in the 21st Century”.

Mr Pachauri had earlier gone on Indian television comparing himself to CV Raman and Mother Theresa as an Indian Nobel Prize winner — in fact, Al Gore and the 2500 member “UN Intergovernmental Panel on Climate Change” chaired by Mr Pachauri shared the Nobel Peace Prize last year. Now the prediction from that UN “Panel” of “a 0.3 deg C rise in temperature in the coming decade” has been contradicted by Noel Keenlyside’s own scientific results. Gunter reports further that 2007 “saw a drop in the global average temperature of nearly 0.7 deg C (the largest single-year movement up or down since global temperature averages have been calculated). Despite advanced predictions that 2007 would be the warmest year on record, made by such UN associates as Britain’s Hadley Centre, a government climate research agency, 2007 was the coolest year since at least 1993. According to the U. S. National Climatic Data Centre, the average temperature of the global land surface in January 2008 was below the 20th-Century mean for the first time since 1982. Also in January, Southern Hemisphere sea ice coverage was at its greatest summer level (January is summer in the Southern Hemisphere) in the past 30 years. Neither the 3,000 temperature buoys that float throughout the world’s oceans nor the eight NASA satellites that float above our atmosphere have recorded appreciable warming in the past six to eight years. Climate alarmists the world over were quick to add that they had known all along there would be periods when the Earth’s climate would cool even as the overall trend was toward dangerous climate change.”

Honest government doctors know that the myth that HIV/AIDS can spread at Western rates in a society as conservative and sexless as India’s has diverted vast public resources away from India’s numerous real killer diseases: filariasis, dysentery, leprosy, influenza, malaria, gastroenteritis, TB, whooping cough, enteric fever, infectious hepatitis, gonococcal infection, syphilis, measles, tetanus, chicken-pox, cholera, rabies, diptheria, meningococcal infection, poliomelitis, dengue and haemmorrhagic fever and encephalitis. Candid environmentalists similarly know that obsessing about climate change distracts from what is significant and within our power to do, namely, the prevention or at least regulation of the pollution of our air and water and prevention of the waste of energy using policies appropriate for a myriad of local communities and neighbourhoods.

The pollution of India’s atmosphere, rivers, lakes, roads and public property is an unending disgrace. Pollution and corruption are mirror images of each other: corruption is to steal something valuable that belongs to the public; pollution is to dispose private waste into the public domain. Both occur conspicuously where property rights between public and private domains are vague or fuzzy, where pricing of public and private goods and services is distorted, and where judicial and legal processes enforcing contracts are for whatever reason weak or inoperable.

Walk into any government office in India and lights, fans, ACs may be found working at top speed whether or not any living being can be seen. A few rare individual bureaucrats may be concerned but India’s Government as a whole cares not a hoot if public electricity or for that matter any public funds and resources are being wasted, stolen or abused.
At the same time, private motorists face little disincentive from pouring untaxed “black money” into imported gas-guzzling heavy automobiles regardless of India’s narrow roads and congestion. There are no incentives whatsoever for anyone who does not have to do so to want to bicycle or walk to work. The “nuclear deal” involves importing “six to eight lightwater reactors” on a turnkey basis; like the Enron-Dabhol deal a decade ago, it makes no financial sense at all and will make even less if the rupee depreciates anytime in future. Our government policy is in general invented and carried out regardless of technical or financial feasibility; the waste of energy and pollution of the environment are merely examples of the waste of resources and abuse of public property in general.

Someone says “The North”, mainly the USA, “is primarily responsible for climate change”. He may mean Western countries have contributed relatively more pollutants and effluents into the world’s waters and air which is probably a good guess since the West has also contributed more to the world’s scientific, industrial and agricultural progress in general over the centuries.

But to think human beings today understand the complexities of climate and its changes adequately enough to be able to control it is a fatal conceit. Philip Stott, emeritus professor of biogeography at the University of London, is among many scientists who have challenged “the key contradiction at the heart of the Kyoto Protocol, the global climate agreement – that climate is one of the most complex systems known, yet that we can manage it by trying to control a small set of factors, namely greenhouse gas emissions. Scientifically, this is not mere uncertainty: it is a lie…The problem with a chaotic coupled non-linear system as complex as climate is that you can no more predict successfully the outcome of doing something as of not doing something. Kyoto will not halt climate change. Full stop.” (BBC 25 February 2002). For Indian foreign or economic policy to waffle on about climate change is as ineffectual and irrelevant as for the Indian Finance Minister to waffle on about AIDS.

Subroto Roy believes — partly from personal experience — that there is only one really sustainable way to fight government corruption whether in Afghanistan, Pakistan, India, the UK, the USA, Russia, China or Mars: tough and clean government accounting and audit processes allied with an uncorrupted press/media. And without clean government accounting, incidentally, all public finance and hence almost all monetary policy becomes meaningless.

I have had slight experience with the so-called multilateral financial institutions — attending a conference and helping to produce a book on Asia & Latin America with the ADB back in Hawaii in the 1980s, and being a consultant for some months at the World Bank and the IMF in Washington DC in the 1990s. The institutions seemed to me gluttonous and incompetent though I did meet a dozen good economic bureaucrats and two or three who were excellent in Washington. The “Asian Development Bank” (under Japan’s sway as the Word Bank is under American sway and the IMF under European sway) was reputedly worst of the three, though the Big Daddy of wasteful intellectually corrupt international bureaucracies must be the UN itself, especially certain notorious UN-affiliates around the world.

Now there are newspapers reports the ADB has apparently voted, under Communist Chinese pressure, to prevent itself from

This should be enough for any self-respecting Government of India to want to give notice to the ADB’s President that the Republic of India is moving out of its membership. Ongoing projects and any in the pipeline need not be affected as we would meet our debt obligations. There is no reason after all why a treaty-defined entity may not conclude deals with non-members or former members and vice versa.

I do not know if anyone in India audits or checks the Election Commission’s arithmetic and procedures. Certainly the EC seems to leave a great deal to be desired by its slowness, its high-handedness and its obscurity/lack of transparency. I have said previously that this may be a result of obsolescent technology and management and organisation — problems that may be common across many departments of the Government of India and our State Governments.

Here then are the elements of a tool for use of ordinary citizens which may allow everyone to check the arithmetic involved in the EC’s counting of those hundreds of millions of votes all of us have cast in the 2009 General Elections.

On the vertical axis is supposed to be the list, by Parliamentary Constituency, of all 8,070 candidates who have contested the polls to the 15th Lok Sabha.

On the horizontal axis is supposed to be a series of 543 lists of Assembly Segments for each Constituency. Please note that the horizontal axis has had to be truncated for lack of space after only ten such segments; this covers the vast majority of Constituencies but there are a dozen or so in Goa, J&K, Arunachal, Manipur, Mizoram, Nagaland, Tripura which are not complete as they each have many more than 10.

So altogether here are the elements of a series of 543 matrices, one for each Lok Sabha Constituency, which may help ordinary citizens engage in a process of themselves auditing the EC’s declared results.

Or, at the very least, the 543 matrices would act as a score-card, and in this nation of cricket-fans, everyone loves a score-card.

(The text below will have to be adjusted appropriately to get the right format, columns etc.)

Close to 389 million valid votes were cast in India’s previous General Election in 2004 to the 14th Lok Sabha, according to the Election Commission’s volume STATISTICAL REPORT ON GENERAL ELECTIONS, 2004 TO THE 14th LOK SABHA VOLUME III (DETAILS FOR ASSEMBLY SEGMENTS OF PARLIAMENTARY CONSTITUENCIES).

Unfortunately, the Election Commission, like the Government of India in general, remains extremely uncomfortable with using Excel or any spreadsheets at all, and hence much of the information they provide remains unproductive — reflecting, I am afraid, rather obsolescent technology and organisation and management. From an Excel spreadsheet I have had to create for myself using EC data, my calculations give the following breakdown of the votes received in 2004 by most of the larger political parties:

JD(U) JanataDal(United) 9,129,366

JMM JharkhandMuktiMorcha 1,846,843

MDMK MarumalarchiDravidaMunnetraKazhagam 1,679,870

PMK PattaliMakkalKatchi 2,169,020

NCP NationalistCongressParty 7,019,236

RJD RashtriyaJanataDal 9,384,147

RLD RashtriyaLokDal 2,463,603

RSP RevolutionarySocialistParty 1,689,794

SAD ShiromaniAkaliDal 3,506,681

SHS ShivSena 7,050,432

SP SamajwadiParty 16,822,902

TDP TeluguDesam 11,844,811

TRS TelanganaRashtraSamithi 2,441,405

That accounts for 372,382,530. The precise total of valid votes that I get by tabulating EC data using my spreadsheet is 388,920,557. The EC itself reports in the very same document a total of 388,672,504. The percentage difference is close enough to zero but it should be zero itself; I shall be delighted if my spreadsheet’s total is the incorrect one somehow, even though it uses the EC’s own data; but it does lead me to ask: “Who, if anyone, audits the Election Commission’s numerical calculations and vote tallies? Why is India’s ordinary public not informed about all this and other processes of the Election Commission perfectly transparently as a matter of routine? Is reform necessary of the processes and procedures of the Election Commission itself?”.

(Incidentally, the slight discrepancy in the totals could have arisen perhaps because my spreadsheet does, correctly, include the relatively small number of postal ballots, whereas the EC’s total possibly has not done.)

Raw votes like those described above do not of course translate directly into seats in Parliament but even so they indicate the state of popular political opinion in 2004. By how much will that popular opinion be found to have changed in 2009? How will demographic changes, and the delimitation exercise that has redrawn constituencies, affect the new outcomes? These are the kind of grown-up adult questions to ask yourself if you get bored with the endless pretentious waffle that emerges from our talking-heads on TV etc regarding the ongoing election.

Notice too the 16.5 million people of India who voted in 2004 for Independents! What on earth has made Dr Manmohan Singh recently initiate an absurd debate against them?

Here below as well is the full list of all parties that were in contention in 2004; if you want to know the vote-share any of them received according to my spreadsheet, send in a comment to this post and I shall try to respond. Better still, look up the EC volume mentioned and create your own spreadsheet from its data, and tell me how accurate mine is. (But beware, the spreadsheet will have some 60,000 rows to start with!)

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